Types of International Business Coorperation

Contents

List of Figures

1 Introduction
1.1 Relevance of the topic
1.2 Demarcation of the topic
1.3 Structure of the work

2 Fundamentals of this work

3 Forms of international cooperation
3.1 Without equity participation
3.2 Joint ventures with equity participation

4 Conclusion

List of footnotes

List of sources

List of Figures

Figure 1: Forms of business cooperation

Table 2: Burger King sales worldwide from 2007 to 2019 through own and franchise operations

1 Introduction

1.1 Relevance of the topic

Progressive globalisation is changing the environment of international cooperation for sustainable development. A world in transition has emerged with a multitude of new actors seeking contemporary answers to economic questions. The processes of change bring challenges that individual companies are not up to. At the same time, however, they open scope for new forms of cooperation.

As an individual, you have to face up to the whole range of tasks with which you are usually overwhelmed. For example, you lack capital or personnel. That's why you join forces, so you can be more efficient in research through unique product features and faster development, profit in manufacturing through faster processes and faultless production from suppliers or make the best possible use of added value through partners in distribution through fast deliveries and efficient order processing.

Due to an increasing complexity and a rapid change in the economy as well as technical innovations, the preservation of an existence has become much more challenging. If you only concentrate on your core business and hand over the tasks to other partners who are more familiar with them, both will benefit. A single company cannot be completely familiar with the subject and the complexity and its many characteristics of a market.

In the age of global competition, the attack of large groups to medium-sized and small enterprises andin view of the increasing complexity of entrepreneurial activitiesprocesses, every entrepreneur must ask himself,what added value he can still afford. Value creation stagesand to outsource work steps, according to new possibilities of more intelligent production andof services, is one of his central tasks.Many entrepreneurs have to rely on both external and internal constraints react and hope to react through cooperationa way out of their problems. Global competition, which forces us to constantly reduce costs, is an essentialfactor of permanent change. Equally decisive is the technological pressure to innovate due to ever shorterproduct and technology life cycles and the associatedthe accompanying increase in research and developmentcosts. In many industry segments, market saturation tendencieswhich can be identified through internationalisationto meet.Internal constraints face external challengesacross the street. For example cost positions must be improved, the nationaland international market presence must be increased, products have to be faster on the market and, in order to achieve differentiation opportunities one must be able to make better use of their own range of services. It is not always possible to meet all these challenges on one's own, and italsodoes not always make sense. Lack of entrepreneurial experience,lack of management resources and the insufficientFinancial strength is the main obstacle.The desiredadvantage depending on the goals that the entrepreneurbets. With an increase in resources along the value chainaccording to the purpose of the cooperation areadvantages connected like cost reduction and thus lower financial requirements, time saving, increasing the breadth and quality of the offer and more intensive utilization of capacities.According to the specific cooperation approachthis list could go on and on. The clearer thecooperation objectives are formulated, the easier it is to find the right cooperation partners and the bigger they becomewill be the chances of success.^{1 2 3}

1.2 Demarcation of the topic

This paper deals only with a few forms of international business cooperation. The most common and important examples are listed, an example is given, as well as their advantages and disadvantages. Also only those corporations are listed which by definition are considered as such.

1.3 Structure of the work

The structure of this work is divided into two sections. The basic part and the main part of the work. The basic part deals with the understanding of international cooperation and the definitions of the essential terms. In order to simplify the introduction to the main part, the importance of cooperation has already been pointed out in the basic part. The main part deals on the one hand with the usual forms of business transactions and on the other hand with more specific. First a form is listed and then its advantages and disadvantages are mentioned. The conclusion summarizes the core aspects of this paper.

2 Fundamentals of this work

First of all, the concept of cooperation must be defined, especially in the international context. In doing so, a delimitation of the characteristics and main types must also be made, since there is no generally accepted definition in either literature or economics, since the term cooperation can be found in both general language use and in the business literature based on the language, cooperation can be translated as collaboration or joint completion of tasks. In business administration, the definition is narrower. Cooperation is understood as the collaboration of two or more legally and economically independent companies to increase their efficiency. This view is broadened by restricting independence to the non-cooperative area and adding a medium to long-term time frame for the joint completion of tasks. Furthermore, the cooperating partners voluntarily commit themselves to cooperation.⁴

Based on this perception, the transitions to international cooperation are fluid. The characteristics already mentioned can be maintained, although the distance between the partners changes by focusing on cooperation partners in different countries. The consideration of all these considerations leads to a comprehensive characterization that international cooperation presupposes a situation in which two or more legally and economically independent companies in different countries cooperate on a voluntary, long-term basis in order to increase effectiveness through deliberately coordinated actions.⁵

The partners involved are referred to as vertical, horizontal or diagonal levels. An overview is shown in the following figure.

Figure 1: Forms of business cooperation (in the style ofMöller 2009)

Abbildung in dieser Leseprobe nicht enthalten

Vertical cooperation occurs when companies are linked along the value chain, such as between buyer and supplier. When companies in the same industry cooperate, this connection is called horizontal cooperation, and a connection with other industries is called diagonal cooperation. Based on the conceptual classification mentioned above, a large number of different types of cooperation have developed, and terms such as license agreement, franchising, subcontracting, strategic alliance and joint venture are also used. For this reason, the constructs of strategic alliances are explained in more detail below.⁶

3 Forms of international cooperation

3.1 Without equity participation

3.1.1 International licences

A licensor is a company with a product which stands out due to its special features. He can make his products, services, brand and/or technology available to a licensee through an agreement. This agreement describes the terms of the strategic alliance and allows the licensor affordable and low-risk access to a foreign market, while the licensee gains access to the competitive advantages and unique assets of another company. This is potentially a strong starting position for both parties and is a relatively common practice in international business.⁷

When it comes to strategic entry into an international market, licensing or taking a license is a low-risk and relatively quick method of entering foreign markets.Options for entering foreign markets include export, joint ventures, foreign direct investment, franchising, licensing and various other forms of strategic alliances.Of these potential entry models, licensing is relatively low risk in terms of time, resources and capital requirements.Before deciding on licensing as an entry strategy, it is important to understand the situations in which licensing is most appropriate.

Benefits of licensing include localization by a foreign partner, compliance with strict international business regulations, lower costs and the ability to act quickly. Licensing is a quick entry strategy that, with the right partners, provides almost immediate access to the market. Licensing carries a low risk in terms of assets and capital investment. In most cases, the licensee provides most of the infrastructure. Localization is a complex legal issue and licensing is a clean solution to most legal barriers to entry. Cultural and language barriers are also significant challenges for international entry. Licensing provides crucial resources in this respect, as the licensee has local contacts, mastery of the local language and a deep understanding of the local market.⁸

The disadvantages of this mode of entry include loss of control, potential quality assurance problems in the foreign market and lower revenues due to the lower risk. While low cost entry and natural localization are clear advantages, licensing also brings some opportunity costs. The loss of control in a licensing situation is a serious disadvantage in terms of quality control. The licensing of a brand name is particularly relevant, since any question of quality control on behalf of the licensee has an impact on the licensor's parent brand. The dependence on an international partner also creates inherent risks with regard to the success of this company. Just like investing in an organization on the stock exchange, licensing requires due care in determining which organization to partner with. Reduced revenues due to dependence on an external party is also a major drawback of this model.⁹

When deciding to grant a license abroad, it should be carefully considered whether the licensee represents a strong investment for the licensor and in reverse.

Well-known examples of such limited "granting" of trademark rights are toys, such as toy cars bearing the logo of well-known manufacturers, the production of perfume under the name of fashion labels such as Boss and Prada, or the granting of licenses to beer producers abroad by beer brands such as Löwenbräu or Paulaner and vice versa Paulaner and Coca Cola as licensees of the Spazi of BrauhausRiegele.¹⁰

In order to make licensing successful, the strategic objective of licensing must be determined in advance and a suitable licensee must be found. In addition, the criteria to be applied to the partner must be defined. In addition to the definition of product categories and regions, these include the specifications for the use of the brand, for example with regard to the design to be used, quality specifications and measures for checking compliance with these specifications, etc. These points are particularly important if the licensor continues to use the brand. Finally, the brand should not be damaged by the licensing, but rather strengthened and the brand strength, which can be measured by attributes such as awareness, sympathy, image or willingness to recommend the brand, should develop positively. All conditions associated with the use of the brand to be licensed must therefore also be recorded in the license agreement.¹¹

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